Principles of Industrial Engineering Presented by Professor K.V.S.S. Narayana Rao (Author of this blog) on 23 May 2017 at the Annual Conference of Institute of Industrial and Systems Engineers in Pittsburgh, USA. Industrial Engineering is a management subject or discipline with Engineering as the foundation. Its primary application area is engineering systems. It augmented application area is any system. INDUSTRIAL ENGINEERING IS SYSTEM EFFICIENCY ENGINEERING AND HUMAN EFFORT ENGINEERING (Definition by Narayana Rao - Published in Udyog Pragati, Jounral of NITIE in 2006)
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May 29, 2017

HOW TO APPLY LEAN THINKING IN INNOVATION, PRODUCT AND SERVICE DEVELOPMENT
Matti Perttula

Lean production seeks to increase flow (not resource) efficiency by reducing waste. Flow efficiency is calculated by dividing added value time with total time. The usual situation is that companies focus on resource efficiency rather than flow efficiency of a certain project.

May 24, 2017

Strategy is about the future, and developing strategy is the process of thinking about the future, predicting it, making decisions about it, and taking action to create profitable future. Since

innovations are critical to the future, it’s clear that the management of innovation is entirely strategic in nature.

The classical model of strategy development begins with an assessment of the future, a set of predications about what’s going to happen, followed by the development of initiatives that align with that future to assure survivaland growth of the organization. Future is entirely risky and it makes much more sense to prepare for a multitude of possible futures by developing a strategic portfolio of initiatives and innovations.

The astute innovation strategy thus defines a range of initiatives that could become important under many different future states; in other words, a portfolio. The elements of such a portfolio - products, services, processes and organizational approaches, etc. - will be applicable in a variety of different

future conditions, and as events unfold some will prove to be invaluable while others will be irrelevant, remaining forever on the shelf. With many projects under way at the same time, the typical, large R&D group is naturally managing a portfolio by default, so the for these organizations the question is not the existence of the portfolio, but its composition. The idea that the portfolio must be closely linked to the organization’s strategy, however, is a surprisingly recent one, and has been labeled as the third generation practice in the long history of professional R&D.

The first generation, starting at the very beginnings of systematic R&D in the early decades of industrialism through the mid-1800s, was largely a randomized process of exploring basic science in the hunt for commercial opportunities. Thomas Edison had a more focused approach and it was the prototype for the highly systematized process that was then perfected during World Wars I and II, mission-driven R&D.

Third generation methodology focuses on R&D portfolio management as a key element of organizational strategy, and it is recognized as a standard practice in the world of R&D management. It’s described in the “Third Generation R&D,” published in 1991, and includes a number of very sophisticated portfolio analysis techniques.

A fourth generation practice of R&D management has also been defined, which expands the scope of the third generation approach with a much greater focus on specific processes for creating breakthrough innovations.

Stages of Innovation Methodology

Every idea is born in its own distinctive moment of inspiration. Many are immediately discarded, while some go through further development pathways.

Effective innovation methodology shapes the pathways by which individual ideas will be developed, and just as important, it’s a broader process which improves the odds that good and great ideas actually do arrive with regularity and that they are developed to their full potential.

Methodology must have means of systematically filtering multitudes of new ideas, applying processes for turning the best ones into candidates for innovations, and using tools to help bring them to market.

So innovation management has five stages at least in converting ideas into successful businesses.

1. Creating or finding great ideas;
2. Targeting, or choosing those worth developing further;
3. Innovation development, transforming great ideas into potential innovations;
4. Applying potential innovations to develop markets and create businesses.
5. Support business till it becomes a success. The innovation team has to debug issues that surface during the actual business transactions.

From Permanent Innovation - Langdon Morris

Permanent Innovation
The Definitive Guide to the Principles, Strategies, and Methods of
Successful Innovators
Langdon Morris

Langdon Morris is a co-founder and principal of InnovationLabs LLC and Senior Practice Scholar at the Ackoff Center of the University of Pennsylvania and Senior Fellow of the Economic Opportunities Program of the Aspen Institute.

Third Generation R&D Management

Written by three senior consultants from Arthur D. Little, This book relates how R&D management has evolved from the naive "strategy of hope" approach of the 1950s and 1960s, when companies spent lavishly in the vague expectation that something good would result, to the more systematic approach of the past two decades. The third generation of R&D is a pragmatic method for linking R&D to long-term business planning. It shows managers how to: integrate technology and research capabilities with overall management and strategy; break down organizational barriers that isolate R&D from the rest of the company; foster a spirit of partnership and trust between R&D and other units; and create managed portfolios of R&D projects that match corporate goals.

Writing on Top Management Challenge Areas for A to Z Blogging Challenge - Reflection

For the April A to Z Blogging Challenge 2017, I wrote on the theme top management challenges. I got an opportunity to think about the issues facing the top management and do literature review regarding the topic. I realize now that I can continue the work on these articles for further and provide a further list of related articles that can be read by interest top managers to develop an understanding of the published literature on the issues identified. Thus I see the potential for studying and enlarging the ideas during the rest of the year. So I am happy that my exercise is a fruitful one.

I got more than 5000 page views for the articles during the challenge period. I am happy with the page view performance also.

I intend to write next year on the theme Entrepreneurial CEO Characteristics and Activities. The series will use the article "HIRING AN ENTREPRENEURIAL LEADER". By: BUTLER, TIMOTHY. Harvard Business Review. Mar/Apr2017, Vol. 95 Issue 2, p84-93. as the primary resource. The topics are likely to be from the following.

CONSISTENCY or FLEXIBILITY
PROVEN or POTENTIAL
CAREFUL or BOLD
EXPLORE or SETTLE
PREDICTABLE or POSSIBLE
BONUS or SALARY
SAFETY or OPPORTUNITY
MEDAL or JOY
PUZZLE or BLANK CANVAS
NIMBLE or STEADY
CHANGE or CONSTANT
KNOWN or UNKNOWN
PATIENCE or EXCITEMENT
FRONTIER or HOME
SET or OPEN
WILD or TAME
VARIETY or CERTAINTY
INHERIT or CREATE
OWN or MANAGE
SUGGEST or DIRECT
LEAD or PARTICIPATE
SHAPE or CONTROL
CAPTAIN or NAVIGATOR
OWNERSHIP or TITLE
GRACE or POWER
COMPLETE or REFLECT
ASPIRE or ACCOMPLISH
MEMBERSHIP or POSSESSION
KNOWLEDGE or POWER
PRESIDENT or MINISTER
PROFIT or EQUITY

I shall try to collect information and create initial posts and then make the updated posts for the April Challenge.

I thank the A to Z team Arlee to Zealous participants for creating a network of bloggers and an event for acting and interacting. I intend to participate in the activities of AtoZ Challenge throughout the next year.

May 7, 2017

Sometime back we had business process reengineering. Now we have business reimagination. This reimagination is triggered by new digital technologies. It is also being named digital reimagination.

Digital Reimagination

Five key technologies (Digital Five Forces) are maturing and precipitating
the shift to the Digital Consumer Economy. These are Mobility and Pervasive Computing, Big Data,
Social Media, Cloud, and AI-Robotics. These forces are being used in various permutations
and combinations to drive new applications. As a result, new Digital Composite Forces are emerging.

Foremost among them is the Internet of Things, which combines mobility and pervasive computing,
big data, cloud, and—increasingly—artificial intelligence.

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Said Business School, Oxford University
27 April 2017

The Re-Imagination of Healthcare and What's to Come -- 2013 DHC
December 2013
Moderated by StartUp Health's CEO Steven Krein, this panel of industry experts discusses why there has never been a more exciting time for healthcare innovation and what this means to healthcare ecosystem stakeholders like providers, patients, entrepreneurs, government, corporations, and investors. This forward-looking discussion explores how the Golden Age of Entrepreneurship and Digital Health is creating an innovation landscape in healthcare like we've never seen before.

Moderator: Steven Krein -- Co-Founder and CEO, StartUp Health

Eric Gertler -- Executive Vice President, New York City Economic Development Corporation

Maria Gotsch -- President and CEO, Partnership Fund for New York City

Ryan Olohan -- National Industry Director, Healthcare, Google

Todd Pietri -- General Partner, Milestone Venture Partners

www.DigitalHealthConference.com
www.nyehealth.org

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NYeHealth

Re-Imagining Work
Published on 25 Sep 2013
Dave Coplin, Chief Envisioning Officer at Microsoft, imagines what might be possible if more organisations embraced the full, empowering potential of technology & encouraged an open, collaborative & flexible working culture. Discover more RSA animations: http://bit.ly/1FKMHGv.
The RSA

The first MBA was started at Dartmouth College’s Tuck School 114 years (1904) ago with a four-student class.

In 2011-2012, 191,571 people graduated from U.S. schools with advanced degrees in business, some 25.4% of all the master’s degrees conferred. That compares with 178,062 master’s degrees in education, or 23.6%, of all the advanced degrees.

More than 16 million people in the U.S., roughly 8% of the country's population, now has a master's on his or her resume (2014)

On July 19 2013, Financial Times, p. 8, has a report on business schools (Emma Boyde, “A degree of relevance for the 21st C.?” p. 8). According to FT, there are 15,673 institutions worldwide offering business degrees at all levels. Basically, America invented the MBA. In 2011-12, some 156,400 students were enrolled in US MBA programs.

April 2016
India has at least 5,500 B-schools in operation now.
In 2015-16, these schools offered a total of 5,20,000 seats in MBA courses, compared to 3,60,000 in 2011-12.

January 2015
According to AICTE, the number of management institutions have risen from 2,614 in 2006-07 to 3,364 in 2013-14.
According to All India Council for Technical Education (AICTE), 3,54,421 students enrolled for MBA in 3,364 institutions across the country last year.

Teaching with Emotional Intelligence: A step-by-step guide for Higher and Further Education professionals

Alan Mortiboys
Routledge, 01-Mar-2013 - Education - 176 pages

The way teachers shape and handle their own feelings and those of their learners is central to the success of learning. Now in its second edition, Teaching with Emotional Intelligence shows how to manage this influential yet neglected area of learning and teaching. This practical book looks at how lecturers and teachers can develop and use their emotional intelligence to enhance their teaching and their students’ learning.

Taking the reader step-by-step through the learning process and looking at the relationship from the perspective of both the teacher and the learner, this book will help the reader to:

plan the emotional environment;
learn how to relate and listen to learners effectively;
read and respond to the feelings of individuals and groups;
handle and reveal their feelings as a teacher, as appropriate;
develop self-awareness as a teacher;
recognise their prejudices and preferences;
improve non-verbal communication;
plan for the physical experience of learners;
deal with their learners’ expectations, comments and questions.https://books.google.co.in/books?id=ZoCpAgAAQBAJ

Emotion: Theory, Research, and Experience, Volume 5: Emotion, Psychopathology, and Psychotherapy is concerned with the formulation of models of emotion psychopathology and psychotherapy.

The book focuses on the dysregulation of emotion, methods for changing emotion and the experience of emotion. The papers contained in the volume are grouped into theoretical works that link emotions to psychopathology and psychotherapy based on concepts derived from evolutionary biology; theoretical works that utilizes psychoanalysis in understanding emotions; and the transformation of cognitive constructions through psychotherapy. Psychologists, psychiatrists, psychoanalysts, sociobiologists, and students in the allied fields will find the book a good source of insight.https://books.google.co.in/books?hl=en&lr=&id=WoVGBQAAQBAJ

Designing Trustworthy Organizations

Sloan Management Review, Summer 2013

Robert Hurley: Six types of signals people consider when deciding whether to trust a person, group or organization (a “trustee”):

Common values: Does the trustee share our values and beliefs?
Aligned interests: Do the trustee’s interests coincide rather than conflict with ours?
Benevolence: Does the trustee care about our welfare?
Competence: Is the trustee capable of delivering on commitments?
Predictability and integrity: Does the trustee abide by commonly accepted ethical standards (such as honesty and fairness), and is he or she predictable?
Communication: Does the trustee listen and engage in open and mutual dialogue?

May 1, 2017

Cost Accounting and Cost Measurement for Poor Quality Related Costs

Companies that fail to achieve quality at design level to provide as per customer requirement will fail in the market place. Also if the production system is unable to produce as per the design specification, spoilage will occur, rework will occur and failure of the product at the customer's place occurs sooner than expected. Failure at the customer's end results in customer dissatisfaction, return of the product for repairs and bad word of mouth for the brand. Rework results in extra costs of production. Spoilage is also a loss due to material loss, labor loss and overhead loss associated with the spoilage. As the costs of poor quality are understood and quality improvement methods have evolved, accounting for poor quality related costs also emerged.

Cost of quality framework

Cost of quality framework states that quality can be improved by improving design and production processes and this will reduce appraisal costs, internal failure costs and external failure costs. Also increase in appraisal cost has the potential to reduce internal and external failure costs. To see this phenomenon in practical real life situations, cost accountants are being asked to prepare poor cost of quality statements showing the amount spent on each category of the following costs.

Prevention costs

Appraisal costs

Internal failure costs

External failure costs

Then quality managers and engineers or industrial engineers can come out with plans to increase prevention costs and appraisal costs and decrease internal and external failure costs. Needless to say engineering or managerial economics requires that incremental cost incurred must be less than the benefit realized that is decrease in total failure costs.

Cost accountants have to take the cost of quality categories as cost objectives and provide cost figures for them.

2. Identify Direct Costs - There are no direct costs related to cost of quality

3. Select the Cost Allocation Bases to Use for Allocating Indirect Costs of the Product - For quality related work design hour, inspection hour, rework hour, were taken as cost allocation bases. In the case of external failure there is cost of transporting the item back to the company. For this a transport event is taken as the cost allocation base.

5. Compute the Rate Per Unit of Each Cost Allocation Base - For each activity, total quantity of performance (cost allocation base) is determined and it is used to divide total cost incurred to get the rate per unit of each cost allocation base,

6. Compute the Indirect Allocated to the Product - Compute the quantities of each cost allocation base related to poor quality used by the product. Multiplying quantity with the corresponding rate per unit of the collection base will give the indirect to be allocated to the product for that allocation base.

7. Compute the Total Cost of the Cost Object: In our case of cost of quality is the cost object and we add all items of cost of quality framework to get total cost of quality.

Nonfinancial Measures of Quality

Nonfinancial measures are also important and their importance is brought into limelight by the balanced score card approach, Cost and management accountants have also a role to play in recording data of nonfinancial measures and creating statements of these measures.

Nonfinancial measures of customer satisfaction as index of quality

1. Market research studies on customer preference and satisfaction with specific products and product features.
2. The number of defective units reported by customers as a percentage of products shipped.
3. The number of customer complaints in a period say a month
4. Percentage of products that experience a early or excessive failure
5. Delivery delays - Percentages - Highest number of days
6. On-time delivery rate

The key objectives in accounting for spoilage are determining the magnitude of the costs of spoilage and distinguishing between the costs of normal and abnormal spoilage.

Reducing spoilage, rework, and scrap are important for reducing cost and they are part of production process quality improvement effort.

Concepts used in developing the theory of the topic

Spoilage: Spoilage is unacceptable units of production that are discarded or are sold for reduced prices. Spoilage can occur at any stage of the production process.

Rework: Rework is unacceptable units of production that are subsequently repaired and sold as acceptable finished goods.

Scrap: Scrap is material left over when making a product. It has low sales value when compared with the sales value of the product or sales of value of the input material.

Cost accounting practice recommends normal spoilage is specified as part of production process specification. Its quantum can be evaluated or analyzed at various points of time it can be reduced further if possible by improving the process or technology. In routine accounting abnormal spoilage is reported to managers above the shop floor personnel.

Abnormal Spoilage: The spoilage that should not arise under efficient operating conditions.

Accounting for Spoilage in Job Costing.

Normal Spoilage

The cost of normal spoilage is added to the cost of the product so that estimate cost of product includes allowance for normal cost for subsequent cost estimations.

The disposal value of the spoilage is credited to work-in-progress control account and also to the specific job account. The materials control account and spoiled goods disposal value or income account are debited with the disposal value.

The effect will be that in specific job, it will be charged for all the expenses incurred for the job, but only good units are shown as output. The units which became spoilage are not included in the output and the disposal value of these units is deducted from the total expense. So the cost incurred due to the spoilage is included in the total cost and when one calculates the unit cost of the finished item, it includes a charge for the normal spoilage.

Abnormal Spoilage

In the case of abnormal spoilage, the total cost of the spoilage is removed from the specific job account by giving a credit to it and it is debited to loss from abnormal spoilage account.

Thus the company management and executives are made aware of abnormal losses so that actions are initiated to prevent them in the future. Accounting and reporting have the purpose of making managers aware of the need to act to prevent undesirable events.

Accounting for Rework in Job Costing

Rework is done on finished products or components, that did not meet specifications and after rework they become acceptable finished goods of components. There can be an estimated or accepted as normal rework. Any rework above this normal rework is abnormal rework.

Normal Rework

The rework cost is charged to the specific job. Rework may involve some material use, labor use and also incurring of overhead cost. Hence the entry is

Accounting for Scrap

When the dollar amount of the scrap is immaterial

When the dollar amount of the scrap is insignificant, scrap is returned to the store or scrap store with documentary proof. Periodically, the scrap is sold and income is recorded as income from scrap. If it is material, then the income can be credited to the overhead account and thus overhead cost will become less to that extent.

When the dollar amount is substantial at Job Level

If the dollar amount of the scrap is substantial at the job level, then the scrap generated in the job is measured immediately, returned to the store and its value is ascertained based on the estimates sale value of the scrap. Then the entry for the return of scrap to stores will be:

Material Control A/C Debit

Work in Process A/C role of the Job Credit

Thus the cost accounting system helps in highlighting the abnormal costs of spoilage and rework so that remedial action is taken by the managers concerned. Also it provides the cost of the products manufactured by a firm as a true representation of the costs incurred by the firm and it helps the company to provide proper cost estimates for the future and price quotations based on these cost estimates.